Mergers, investments and demand expansion

Bourreau, Marc and Jullien, Bruno (2018) Mergers, investments and demand expansion. Economics Letters, 167. pp. 136-141.

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Official URL: http://tse-fr.eu/pub/32603

Abstract

In this paper, we study the impact of a merger to monopoly on prices and investments. Two single-product firms compete in prices and coverage for a new technology. In equilibrium, one firm covers a larger territory than its competitor with the new technology, leading to singleproduct and multi-product zones, and sets a higher uniform price. If the firms merge, the merged entity can set different prices and coverage for the two products. We find that the merger raises prices and total coverage, but reduces the coverage of the multi-product zone. We also show that the merger can increase total welfare and consumer welfare.

Item Type: Article
Language: English
Date: June 2018
Refereed: Yes
Uncontrolled Keywords: horizontal mergers, investments, competition
JEL codes: D43 - Oligopoly and Other Forms of Market Imperfection
L13 - Oligopoly and Other Imperfect Markets
L40 - General
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 22 May 2018 13:10
Last Modified: 24 Jul 2019 09:18
OAI ID: oai:tse-fr.eu:32603
URI: http://publications.ut-capitole.fr/id/eprint/25903

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